United Arab Emirates - Market OverviewUAE - Market Overview
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The United Arab Emirates (U.A.E.) is a significant U.S. export market and an important regional hub for American companies doing business throughout the Middle East, Africa and South Asia. The U.A.E. has a population of approximately 9.5 million, out of which about 85 percent are expatriates. In 2015, the U.A.E. registered a real GDP growth rate of 3.9 percent, down from 4.6 percent in 2014. Due to its vast oil wealth and relatively small citizen population to which it must provide services, the U.A.E. is well positioned to handle the current low-oil-price economy. To diversify away from oil, the government is transitioning from an investment economy to a knowledge economy. To this end, it is focused on developing new industrial and commercial sectors, including aerospace, healthcare, education, and defense and tourism.
The U.A.E. is a leading commercial center serving the Middle East, Africa, and South Asia, with a significant portion of its import volume ultimately being re-exported. Dubai in particular plays a central role as a regional trade, logistics and tourism hub. Its economy has also been buoyed by ongoing construction and infrastructure projects in the lead-up to the Dubai World Expo 2020. While the construction sector has come under substantial pressure due to the prolonged slump in oil prices, the sector remains resilient, and Dubai's planned real estate and infrastructure projects are progressing. Most notably, the expansion of the Al Maktoum International Airport by Dubai Airport Authority, valued at $33 billion, is Dubai’s single biggest project.
Abu Dhabi has been relatively more exposed to the commodities downturn given its reliance on the oil sector. As a result, the government has enacted austerity campaigns to rein in its spending. This includes fiscal restraints and revenue-generating measures across the board, e.g., energy price reforms, subsidy reforms, wage freezes, prioritization of capital spending, and expansion of non-oil tax revenues. Some projects that have been delayed and could be awarded in the future include the second phase of the national railway network by Etihad Rail and the Sheikh Khalifa Medical Hospital.
Hydrocarbon production remains critical to the U.A.E. economy, amounting to $65 billion or approximately 20 percent of all export revenue, according to the U.S. Energy Information Administration (EIA). As a result of low oil prices, these revenue figures are down from a peak of $123 billion in 2013. The state-owned Abu Dhabi National Oil Company (ADNOC) and its operating companies are in the process of expanding the output of crude oil to 3.5 million bpd by 2020, which the country aims to maintain until 2027.It is also developing the country’s downstream industries, including petrochemicals and plastics.
ADNOC continues to face pressure to cut costs and improve efficiencies to offset the fall in global oil and gas prices. The company cut up to 5,000 jobs in 2016, according to MEED reports, and ADNOC and its associated companies have undertaken major organizational changes, including the appointment of a new Director General and the replacement of six CEOs across the group of companies. The Minister of Energy further noted that mergers between these companies have been and will continue to be used as a tool to cut costs and raise efficiency through consolidation. Despite a slow start in January, the U.A.E. met and exceeded its OPEC-mandated production cuts of 139,000 bpd in the first half of 2017; the Minister of Energy claims the country cut a full 200,000 bpd in March.
In terms of U.S. trade, the U.A.E. is the largest export market for American merchandise exports in the Middle East. In 2015, U.S. exports to the U.A.E. totaled $23 billion, a 3.6 percent increase from 2014. U.A.E. exports to the United States decreased by 10.7 percent in 2015 to $2.5 billion. Overall U.S.-U.A.E. bilateral trade was $25.4 billion in 2015.
Leading sectors for American exporters in 2015 included aircraft, spacecraft, and associated parts; electric machinery, sound equipment, and television equipment; and nuclear reactors, boilers, and associated machinery. Demand for imported goods continues to be fueled by a number of factors, including a rapidly expanding U.A.E. civil aviation sector; the country’s newly formed space program, which aims to send a probe to Mars by 2020; implementation of major infrastructure and transportation projects; and ongoing oil and gas industry modernization and production.
Foreign direct investment (FDI) is a key pillar in the U.S.-UAE commercial relationship. Between 2012 and 2015, U.S. foreign direct investment in the U.A.E. jumped by over 76 percent to $15.6 billion. During the same period, U.A.E. foreign direct investment in the U.S. increased nearly 34 percent to $27.6 billion. The U.A.E. is now the 7th fastest-growing source of FDI in the United States, and the largest source from the Middle East. Prepared by our U.S. Embassies abroad. With its network of 108 offices across the United States and in more than 75 countries, the U.S. Commercial Service of the U.S. Department of Commerce utilizes its global presence and international marketing expertise to help U.S. companies sell their products and services worldwide. Locate the U.S. Commercial Service trade specialist in the U.S. nearest you by visiting http://export.gov/usoffices.
United Arab Emirates Trade Development and Promotion